Not technology startups, but human startups (aka small business). At one level you can look around the Silicon Valley and see strip malls full of stores, but if you look closely you’ll see that there is very little variety. Here’s two examples:
- Outdoor Gear
In the furniture case, there is almost no variety of stores in the area. You either have Ikea, Ethan Allen, or some other chain retailer or you have a strip mall store that’s importing some low cost furniture from the pacific rim (almost all of these stores have the same selection). What we don’t have is any mid-range dealers, who have broad selection. What’s different is that when I’m in Reno there are at least a dozen furniture stores that have a variety of choices (from pacific rim to high end). How can a city of about 200,000 people have better choices than an area of 5M?
Some insight might be gained by looking at outdoor gear, another speciality area. Here I can name the stores in the area off the top of my head:
- Mel Cotton’s
- Sports Basement
- Sun Valley Ski & Patio
- Any Mountain
If you’ve been paying attention I’ve been looking for some Ski gear in July, which means that outside of being impossible, it’s almost pointless to go shopping locally. However, in talking with people at work about the problem I did make the following observation, which is:
Why does Reno have more independent retailers of outdoor & ski gear than the Silicon Valley?
The two theories come to mind:
- Cost of Labor
- Cost of Land
Most non-box retailer operate on fairly small margins, so the ability to find and maintain a staff who has some expertise in the goods that you’re selling is going to be very difficult if the cost of labor is high. In theory in Reno you can make a living working at a sporting goods store or a furniture store. However in the Silicon Valley that’s impossible! So, not only are you now faced with hiring sub-standard help (think Fry’s) which really doesn’t serve your customers well. You’ll also be faced with the double whammy that the cost of land (rent is ~$2-$3 /sqft) is so high that you’re unable to pay a premium for better talent. Thus you end up in a vicious cycle where you’ve got low margins, high cost of labor and land and as soon as a week month or two come by, you’re dead.
The inability of the Silicon Valley to create a true diverse startup culture, limited to high margin ideas is a true cost. We tinker but don’t foster tinkers.